This multibagger metal stock carries a ‘BUY’ tag from ICICI Securities

“The demand for 400 series stainless steel is growing in India and its volume share is increasing. JSL has a clear cost advantage over the 400 series, which will eventually replace the 400 series as the progressively largest volume contributor,” notes stated in.

Through cycle EBITDA (earnings before interest, taxes, depreciation and amortization) has increased to 18,000-20,000/te from around 13,000/te five years ago. According to the brokerage, cost efficiency measures like better power plant PLF, improvement in coal GCV, work on induction furnace, rail siding have added up through EBITDA.

Lower forex volatility coupled with lower working capital as well as lower logistics cost and reduced inventory holding/valuation cost have also helped EBITDA margins, ICICI Securities highlighted.

“With the ~1mtpa volume expansion, we see progressive deleveraging/FCF generation, improvement in consolidated RoCE (due to significantly lower capex intensity) and improvement in valuation multiples that a converter business model deserves. The NCLT approval is awaited for the merger of JSL and JSHL (Jindal Stainless (Hisar)).

JSL is facing changes in the prices of some of its key raw materials. According to ICICI Securities, this aspect could lead to a fall in demand scenario if prices are volatile. Volatility in these materials can lead to an increase in inventory which may have some impact on the performance of the company.

Jindal Stainless (JSL) reports five-fold jump in consolidated net profit 411.6 crore for the September quarter, mainly on account of higher earnings, as compared to 80.6 in the year-ago quarter.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.